Thursday 9 August 2007

Pic of the day: Defying gravity?

Imaginary 2009

Like yesterday, I am just making up this entry to make it look the way I imagine 2009 will be. The truth is of course that I have no idea what will happen, or whether I will even be there. Still, it seems like something I could enjoy reading if I am still around. And perhaps so may you!

Fiction starts here

9. August 2009

OK, I admit it. I was wrong again about the US economy. I was sure that when the Americans had elected a new president, the cupboards would be opened and skeletons would come tumbling out.

After all, the nation should have gone into recession in 2001 and stayed there for a couple years, before coming out stronger after working off the flab. This did not happen, of course: The housing bubble replaced the dot.com bubble after only a few months, and then grew much larger. People kept borrowing and spending, borrowing and spending, using property as collateral. It was like one of those cartoons where someone walks off a cliff but does not fall until they look down. And the Americans did not look down, just kept walking. Well, surely they would stop and think once there was a change of government? Well, the Democrats took over Congress and Senate, and in 2007 the economic tribulations seemed to begin with the collapse of the "subprime" credit. By now I reckoned America had painted itself into a corner so badly that the economy would crash completely. I expected mass poverty and riots in the streets.

Well, things are not exactly what they were in 2006. The interest rates, already low, were lowered again by a panicky Ben Bernanke (Chairman of the Federal Reserve). The slow and dignified decline of the US dollar turned into a full-blown devaluation of the kind you'd normally see only in third world countries these days. Incredibly, America once again managed to export its problems. I must have underestimated the irrational confidence other nations have in the United States. Rather than just let America drop and fall, and trade with each other instead, the creditor nations panicked at the thought of losing their markets. Now they are the ones having a hard time, while America is hobbling along fairly well, at least compared to what they deserve after a generation of partying on borrowed money.

Of course it isn't all fun and games, and the new government is taking some flak, as if it was suddenly their fault that the party had to end. But the complete and utter panic that any rational person would have expected is still far away. The Americans still think they are the world's greatest country and anybody else is just envious for not being able to live there. As if. They may still have the world's greatest army, but for Chinese money. How long do you think that is going to last?

On the bright side, the turnabout came in the nick of time for my native Norway. The economy was running so fast it was smoking, we had to import thousands of people to get jobs done (not counting the thousands of semi- refugees that don't help out at all but just mooch), and houses were "worth" 20% more a year in the cities. Well, I'm happy to say that this is over for now. Took long enough, though.

So what's ahead? I may be slightly less eager to foretell the future with confidence, but here is my best guess: The USA will continue its stagflation. It won't plunge screaming into the abyss, but will be bogged down for the foreseeable future. The largest developing economies, like China, India and Brazil, will come back quickly because of their strong home markets; they all managed to build a solid middle class before the crisis. They will likely trade more with each other and with other economies that are more creditworthy than the USA. If the dollar continues to slide, it will simply not be an attractive currency to sell in, since its value is already reduced when the bills fall due.

On the other hand, America now has a big bonus to exports, which could help them export their way out of the problem. It will certainly take time, though. So over time, they will still not be able to keep up. But it seems the nation won't be smashed on the rocks either. I am sure there are billions of people who are sorry about that, but I'm not one of them. Most of my friends are American, after all. In a way, I hope in the future we will all be American - just less stupid, but equally lucky.